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Dow 22,000: The Delusion Continues

— James West

With self-congratulatory accolades flowing effusively from within America starting at the top with Donald Trump, it behooves the objective market participant to recall the reasons that have caused the Dow’s meteroic rise to 22,000 points since the financial crisis broke in the first place.

Talking heads ala Bloomberg and CNBC point to earnings and the incredible growth in market cap of companies like Apple, Google, and Amazon, but without recognizing that the financial performance has been purchased with a debt to be paid by the as yet unborn.

Pretending that you’re the architect of your good fortune is fine if it is accomplished honestly. But such is not the case with the Dow or any metric of the U.S. financial system.

Essentially, the United States has fabricated (they called it “quantitative easing”)  a capital base of $4.5 trillion with the stroke of a key (they’re calling it a “balanace sheet”, a remarkable feat of Orwellian doublespeak if ever there was one), and now deploys that capital into the uppermost layers of its financial markets through near-zero interest loans.

This drove the perception globally that the United States was determined to subsidize its entire stock market, making it the only stock market in the world with a floor hard-wired in by government policy. It doesn’t take an algorithm or a genius quant to arrive at the conclusion that this is the best market to deploy capital into.

But let’s not fool ourselves: This is a subsidy of epic proportions, and thus makes Trump’s trumpeting of “America first” an historic depiction, moreso than a current political ambition.

This is only possible for a country whose currency has been foisted on the rest of the world so completley that it is the default unit of global trade, and the number one reserve currency among major economies.

In other words, nobody can afford to call foul without besmirching their own national worth.

It is important that we who fail to be bamboozled by this elite financial slight-of-hand continue to converse and expose the fraud that is thus being perpetuated on future generations, in the form of a debt whose sheer scale defies repayment.

Why does this matter, you might ask?

Well the principle reason for concern for the vast excess of liquidity sloshing round the global marketplace is the artificially stimulated demand that results. We have become, in the first world at any rate, nations of entitlement, who fully expect to trade in their iPhone for a newer model every 12 months and their Range Rovers and Porches every 24.

The excess of liquidity translates into a humungous waste of resources, as we race to exploit every square inch of raw material for conversion into fligh-of-fancy consummable good to be inventoried on balance sheets in the pursuit of perpetual double-digit, q-on-q growth.

But secondarily (though of equal import) is the reality that the complexities and irreconcillable contradictions in the international math has bred a complacency unprecedented in its epidemic scale, whereby those educated in the most hallowed halls of post secondary institutional learning have abdicated their common sense in favour of a willful and comfortable ignorance.

Don’t uspet the apple cart. Don’t kill the golden goose. Don’t be such a hater. Stick your damn head back in the sand and enjoy the grit in your teeth we are marketing as caviar.

We delude ourselves into the belief that the Earth can support 9 billion people living a middle class quality of life. The mathematical impossibility of such a thought is glaring through the simple exercise of considering each and every person with a car. There isn’t enough steel, lithium, electricity or asphalt produceable by the planet to support the infrastructure demands such a levelled highway implies. Never mind that we should all be so fortunate as to eat three square meals featuring meat protein at at least two of those.

This is the essence of unsustainability, its opposite :sustainability now so overused as a cliche by institutions and corporations as to be virtually meaningless, if not representative of it’s opposite.

Tedious and unpopular as this position evidently is in the era of Trumplings whose sole visceral objective is followers and retweets, under the guise of making a horribly defective nation somehow great, we must nonetheless shake off the rose coloured glasses in the interest of salvaging a future.

At this rate, it will be a miracle that the implied social resentment building under a dome of increasing income disparity doesn’t result in all-out civil war. Some would argue that this is already underway, in the form of racial tensions that pit persons of colour against law enforcement on a daily confrontational basis.

So while the buffoons of Wall Street and White House celebrate what is essentially their incremental demise, let those who retain a clearer vision not celebrate, but lament, the fact that the democratic process ensures an acceleration toward a premature downsizing of human population as a direct result of an apparent majority of citizens believing that Dow 22,000 is something to cheer.

James West

James West

Editor and Publisher

I employ a Capital Efficiency Model that dictates money should never be exposed for longer than is absolutely necessary to the possibility of being lost. Thus, I routinely sell half my position when a stock doubles from my entry price, and I sell stocks that lose 20%, unless there are...
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Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.

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